The Western press, including the Wall Street Journal, are reporting the government of China has briefly shutdown several large smelters. After villagers realized hundreds of children had been made ill in one community with dangerous levels of lead found in their blood, the parents took matters into their own hands and stormed the local facility. As a parent of two small children myself, I can sympathize with their anger.
This is the second major lead pollution scandal in China recently, but unfortunately there are “countless” small smelters all over the country, often partially owned by local officials. The central government has been unable or unwilling to make changes that will actually clean production methods up. Lead and many other toxic chemicals are pouring into local air and rivers, and into products that exported around the world including the USA. Unfortunately, no one is testing products at our border.
Our present “open” trade system with China actually encourages them to pollute while punishing American manufacturers for doing the right thing environmentally. Factories in China need to be held to our environmental standards for the sake of their own children and our own!
Plus, this ridiculous pollution double standard has left the USA in a position where it is cheaper to close our own factories and move production to China, where the cost of environmental sound production methods are ignored. I call this extreme difference in toxic chemicals produced in the USA and the heavy pollution in China the “Pollution Disparity”. The media talks about wage difference between the USA and China, but that is only one of multiple issues. I can say as former business executive that lived for years in Asia, that the Pollution Disparity is at least as much of the difference as wages. It must end, as China must raise its production standards, for the sake of children of both nations, and reduce reckless cost advantage it gives China that is costing America millions of jobs.
Washington needs to get off its rear and do something positive for a change. Every category of product imported from China needs to be reviewed at the source and border for the pollution it causes and dangerous chemicals children here and there are being exposed to.
I will discuss this at more length in the future.
Founder of MadeinUSAForever.com your source for American-Made products
The US Federal Reserve under Ben Bernanke has, according to their own figures released today and reported by the Wall Street Journal again put its “assets” over $2 trillion. This is twice what it was one year ago, in major and risky break from policy.
As a former finance executive and author, this data really terrifies me on several levels:
First of all, the Fed has bought $610 billion in mortgage backed securities from elite banks in the past six months, including $67 billion worth in the last week alone. It’s these same toxic assets that have killed many smaller banks this year, including just today Guaranty Bank of Texas. This was the financial paper, similar to a bond, that Wall Street created by combining thousands of low quality mortgages, the majority being from California, Florida, Arizona, and Nevada. Somehow Wall Street got rating agencies like Standard & Poor’s to give AAA ratings to this junk paper and proceeded to sell it to banks, investors, mutual funds, etc. This scam funded the last two years of the housing price bubble and greatly enriched Wall Street. Now the banks who for some reason have not been able to dump these toxic assets on the Fed are being forced to write them down to their real value, assuming a 40% loss or more on the face value based on the real mortgage default rates. The Fed is playing an interesting trick though and valuing these bonds at face value! Meaning those “assets” of $610 billion are really worth probably just over half that.
Secondly, the Fed is also holding literally hundreds of billions of dollars in Bear Sterns, AIG, loans to banks, as assets at face value, assuming everything is hunky dory. Plus, a new one now over $111 billion unclear “government agency debt” that did not exist six months ago!
Thirdly, Why is the Fed being allowed to ignore the real value of these assets? Ignoring proper accounting standards will eventually come home to roost as mortgage holders continue to default as a lot of this paper becomes worthless. These real losses mean our $2 trillion deficit this is realistically hundreds of billions of dollars worse, but that fact is being swept under the rug. Any business operating this way would be bankrupt and under police investigation.
Fourthly, when are people responsible for the whole mortgage and mortgage based financial paper scam going to be brought to justice? These hundreds of billions of losses make Madoff look like small potatoes (he also deserves no mercy).
Finally, where is a full and open accounting of why these actions are taking place, where this money is to do it really coming from, being used, and the plan for minimizing losses? The Federal Reserve in nominally independent from the government, but in the end is the taxpayer who carries the burden.
The other loss that is harder to gauge, but is just as real, is the Fed trying to sweep these issues under the rug has turned itself from one of the world’s most prominent government financial institutions into something more akin to a banana republic bank. Instead of focusing on making the USA great again, yet another costly distraction pushing us towards decline.
Founder of MadeinUSAForever.com, a source for products made in the USA.
In another blow to small businesses, local banks are going down by the dozen this year. Local banks, much more often than the government, are the key source loans for many small businesses. Huge supposedly “to big to fail” banks like Citicorp and Bank of America have been expanding rapidly in other countries and outsourcing jobs, yet when things got tough they flew straight home to Washington and got hundreds of billions in funding. Unfortunately hundreds of communities, smaller banks do not receive such preferential treatment.
According to today’s Wall Street Journal, Alabama based Colonial Bank was by no means a small community bank, having 345 branches in five states, but they were important to that regions growth and prosperity. The government having lost $2.5 billion on Colonial and an unknown future amount of losses due to asset guarantees, has pawned off most of their assets to rival BB&T in a deal too good for them to pass up. Many branches will likely close, and communities that previously had both Colonial and BB&T will now have one less choice.
Colonial was the 75th bank to close this year, up from literally zero in 2006, according to the FDIC. Indeed, this year is worse than the last ten years combined by far for bank failures, and we are not yet even out of August.
This hurts made in USA products not just because the failed banks can no longer make loans, but also because many hundreds of other small banks have cut bank lending. Therefore, American based businesses who are already facing a tough recession are not getting the help from local banks they could usually consider as an option. That means little new investment and even factories closing. It cannot be American-made if a factory suddenly losses a credit line and cannot make payroll. Small business creates 70% of new jobs, not big corporations or the government.
Personally, though MadeinUSAForever.com does not need any loans, I do business with a small local bank and am generally very happy with the service. One day I called with a suggestion and they actually put me through to the president!
Washington has to get their eye back on the ball if they want to see true recovery. Small business is the real engine for our economy and is the future’s big business. Local banks community banks are much more like to be in their corner than huge mega-banks, and thus provide funding for real growth.
The Treasury Department has its work cut out for it this year trying to borrow enough to fund our $2 Trillion federal budget deficit, which is five times the deficit of last year.
We have already grown quite dependent on loans from the Chinese, which is ironically money earned from selling cheap goods to the USA. They are the biggest single buyer of our debt now, and had been mysteriously away from the bond market the last few weeks according to the business press. Without the Chinese buying our bonds, effectively not loaning us money, the Treasury Department was hard pressed to fund borrowing recently.
This morning’s Wall Street Journal is reporting that the Chinese are asking for TIPS bonds, which automatically raise interest rates as inflation increases. Much like many folks used adjustable rate loans to fund buying a home, the government has started using similar bonds to fund the debt. Unfortunately, as was the case with many homeowners, the interest rates eventually increase down the road. The interest rate may seem slightly better than a fixed rate bond now, but carries the very real risk to the USA it will eventually cost us much more later. The government bailed out many homeowners, but who can bail out the government?
In effect, if the USA wants to continue to borrow heavily from China, it is already has to give better terms, like this inflation protection to the Chinese. This change reflects growing Chinese influence over our government and economy. I am surprised this is not getting more press, as it is a pivotal turning point in our decline as a nation.
However, we can solve many of our problems, like unemployment, reduce the trade and budget deficits, etc. without any tax increase if we would only buy product made here. Economic recovery can only come from businesses adding jobs. Those jobs enable parents to get off welfare and put food on the table.
Founder of MadeinUSAForever.com (http://madeinusaforever.com/) your source for made in USA products.
According to this morning’s Wall Street Journal, the Chinese government has filed suits with the WTO (World Trade Organization) against both the USA and EU to continue to allow access of certain imports in spite of safety and fair pricing issues.
The WTO was founded as an agency that was supposed to assure fair trade, but since China was allowed to join, they have hired lawyers and figured out how to utilize it as a tool to sustain their massive trade gap with both the USA and EU. According to the Wall Street Journal, the total combined trade deficit of the USA and EU with China $610 billion.
A deficit of that magnitude is simply unsustainable. The net effect we can already see is the destruction of industry in the USA and EU, while China becomes the next superpower.
Washington seems to have forgotten a long time ago that a country that makes nothing is nothing. It takes real jobs making real products to employee our people and sustain our standard of living.
The WTO cannot become simply a tool of exporters, like China, to pry open markets and bury the last of our factories. Soon “Made in USA” will be history if we do nothing. The purpose of the WTO needs to be reviewed for relevance and significant changes made to assure countries like China with little environmental, worker safety or product safety controls are not allowed an unfair advantage. Otherwise, the USA should reconsider whether being a member of such entities are worthwhile.